Developing expectations independent of the client is critical for effective use of analyti\(\mathrm{cal}\) evidence. Figure 9-9 presents a process for evaluating analytical evidence. Examine the figure and apply it to an example situation in which an auditor develops an expectation that the allowance for uncollectible accounts should be approximately 4 percent of the ending balance of gross accounts receivable. Suppose that the recorded allowance for uncollectible accounts is actually 2 percent. What types of information could the auditor gather that might enable his or her expectation to be adjusted to re-evaluate whether the 2 percent allowance is reasonable?

Figure 9-9

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Determine the analytical procedure to perform and define relevant performance measure(s) Develop an expectation for the performance measure being analyzed Expectation met? Yes Revise expectation in light of revised understanding of economic conditions and information No Perform inquiry and obtain other evidence Yes Should expectation be revised? No Conclude: Performance measure indicates no unusual circumstances of concern to the auditor Conclude: Performance measure indicates unusual conditions that should be investigated with other audit procedures as the auditor considers necessary.